Why small businesses won't hire

Wednesday

May 28, 2014 at 12:01 AMMay 28, 2014 at 3:17 PM

Even as the economy extends its growth and small businesses slowly add jobs, most owners are still holding off on hiring. Many owners have no plans to add to their payrolls, according to recent surveys. In three released last week, the most optimistic reading came from Bank of America Corp., which found that 52 percent of owners plan to hire over the next 12 months.

Even as the economy extends its growth and small businesses slowly add jobs, most owners are still holding off on hiring.

Many owners have no plans to add to their payrolls, according to recent surveys. In three released last week, the most optimistic reading came from Bank of America Corp., which found that 52 percent of owners plan to hire over the next 12 months. But Wells Fargo & Co. found only 21 percent planned to hire, and in a Citibank survey, 25 percent had plans — numbers consistent with other surveys in the past year.

Some owners who do want to hire face obstacles like finding workers who can and want to do the job. In monthly reports from the National Federation of Independent Business, owners have said they can't find people with the skills they need.

What will it take for companies to hire? The answer differs from one business to another.

WANTED: FOUR CLIENTS

Marilyn Trent estimates it would take four more clients bringing in revenue of about $250,000 for her to hire for her company that designs websites and company logos. Trent Creative is based in Detroit, where the local economy has been hurt by the devastation the auto industry suffered during the recession.

Competition is a problem. Even with the city's troubled economy, plenty of companies do the kind of work Trent does. Trent Creative has enough clients to keep the company's seven employees busy, but they're not overworked. So at this point, Trent has no need to hire.

But she's optimistic she'll get more clients. Trent specializes in work for manufacturing companies, and their business is picking up as their customers, Detroit's automakers, sell more cars. She needs to do more sales work to persuade them to create or update their web pages.

"I need to update my website and do more marketing," she says.

THE BURNOUT FACTOR

Mike Coffey isn't planning to hire now, but he will start recruiting if his staff of 16 shows signs of overload. Coffey's company, Imperative Information Group, does background checks for employers. Business is good for the Fort Worth, Texas, company because the local economy is strong. Employers are hiring and want information about job candidates.

Rather than hire to meet the increased demand, Coffey gives workers overtime two or three times a week. He's cautious about hiring because he had to lay off 11 employees in 2009, when the job market froze, and he doesn't want to cut staff again if business slows.

His workers like the overtime. But he keeps an eye on them, watching for clerical mistakes and other signs of burnout.

"Once you start seeing things like that you think, we're probably starting to get a little fatigued," Coffey says.

MORE MONEY, MORE WORKERS

Joe Carter wants to hire workers to expand his company that removes asbestos, lead paint and other toxic materials from buildings. Snyder Environmental has two problems: It needs money, and it needs people willing and able to do the work.

Investors who prefer Silicon Valley startups aren't interested in an unglamorous Little Rock, Arkansas, company, Carter says. And bankers are slow or unwilling to lend to Snyder Environmental or its clients.

"This week, we were delayed again on a project because the bank had not met all the regulatory requirements on the deal," Carter says.

Snyder Environmental has enough demand to double its business over the next two years, Carter says. But besides the money issue, he can't find the people he needs to add to his staff of about 55.

Applicants must pass drug tests and they need background checks to get clearance for military projects. They must also pass a physical examination because Carter's employees work around dust. But Carter's afraid that those who are hired will leave because they hate the work. He's had people quit in their first week.

"They have either an unwillingness to perform the work or an inability to meet the criteria," he says.

HEALTH CARE FALLOUT

Dr. Omar Ibrahimi's dermatology practice needs two more employees, one full-time and one part-time, to run more efficiently. But the rising costs of treating patients and the drop in reimbursement from insurance companies prevent the Stamford, Connecticut, office from hiring, says office manager Saida Ibrahimi.

Because of the changes in insurance under the new health care law, the practice gets 20 percent to 30 percent less revenue from insurers than it did last year, Ibrahimi says. Meanwhile, the practice pays more for medications and supplies.

More staffers would free Ibrahimi to talk to insurance companies to get approvals for procedures, something that Dr. Ibrahimi does. Time he spends talking to insurers is time not spent with patients.

The economic saving grace for the practice is cosmetic procedures like Botox injections and tattoo or scar removals, which are not covered by insurance. Patients pay for those procedures out of their own pockets.